In an exclusive interview with Peter Evans, Diageo Chief Executive Ivan Menezes made his first substantive comments on the prospect of Scotland voting to become an independent country. Diageo is the largest producer of Scotch whisky, which can be distilled only in Scotland, making the September independence referendum crucially important to Diageo’s business. While not firmly endorsing the pro-union stance, Mr. Menezes expressed concerns about the uncertainties surrounding independence in areas such as EU membership, taxes and currencies.

The article as it appeared on Dow Jones:
May 29, 2014 11:55 AM EDT – Diageo CEO: Tax, Currency Uncertainties of Scottish Independence Could Be Damaging

LONDON– Diageo PLC, the world’s biggest producer of Scotch whisky, has weighed into the debate on Scottish independence.

Ivan Menezes, Diageo’s chief executive, said that although the decision was for “the people of Scotland to make,” it was “extremely important” for Diageo–and the Scotch whisky industry–to remain part of the European Union so it could benefit from “free-trade agreements around the world.”

The remarks will be a setback for independence campaigners. An independent Scotland’s immediate membership in the EU has been cast into doubt because it would require the approval of all existing member states, often a drawn-out process.

A spokeswoman for the Scottish National Party, which leads Scotland’s devolved parliament and supports independence, didn’t immediately respond to a request for comment.

In his first substantive statement on the future of Scotland, Mr. Menezes said tax and currency uncertainties surrounding the debate over Scottish independence were potentially damaging for Scotch whisky distillers.

“What we will fight for is keeping our industry competitive and thriving, and we’re very clear on what that requires,” Mr. Menezes said in an interview with The Wall Street Journal.
Diageo makes around a quarter of its GBP11.30 billion ($18.89 billion) in annual sales from Scotch and owns the biggest-selling global brand in Johnnie Walker.

The debate on Scotland’s independence–which will be settled by a referendum in September–has thrown up many uncertainties, including the possibility of a new currency and the precise role of Queen Elizabeth II.

One thing, however, is certain: Scotch whisky will remain Scottish.

Any spirit made by the same process as Scotch–using water and malted barley–but distilled outside Scotland cannot legally be called Scotch. After a rise in counterfeit products, the U.K. government earlier this year passed legislation to prevent non-Scottish firms from selling whiskies marketed as Scotch.

Scotch whisky exports hit an all-time high of GBP4.3 billion ($7.2 billion) in 2013, according to figures released last month by the Scotch Whisky Association, making up nearly a quarter of all U.K. food-and-drink exports.

Mr. Menezes said Diageo had spoken at length to both sides of the debate on Scottish independence. “We’re being very proactive in ensuring the health of this industry is protected,” he said.

Scots will vote in a referendum Sept. 18 on whether to become an independent country and end a three-centuries-old union with the rest of the U.K., which consists of England, Wales and Northern Ireland. Official political campaigning for the referendum begins Friday.

Although Mr. Menezes didn’t come down on either side of the debate, he adds his voice to a growing list of business leaders concerned by the uncertainty caused by the Scottish-independence debate.

Already this year, the chief executives of Royal Dutch Shell PLC and BP PLC have voiced concerns over Scotland choosing independence, while pension provider Standard Life PLC said it would consider moving operations to London from Edinburgh.

But even if it wanted to move, the laws on Scotch production mean Diageo must stay put.

“Unlike other businesses, we can’t pick up and leave Scotland,” Mr. Menezes said. “We’re there to stay.”

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